Proposal for a Regulation of the European Parliament and the Council amending Council Regulation (EC) No 1734/94 on financial and technical cooperation with the Occupied Territories
Date: 2003-08-29
Institutions: European Commission
Subjects: Community budget, EU financing, Palestine, financial cooperation, occupied territory, technical cooperation

EN

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 29.8.2003
COM(2003) 523 final

2003/0204 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND THE COUNCIL

amending Council Regulation (EC) No 1734/94 on financial and technical cooperation
with the Occupied Territories 

(presented by the Commission)

 
EXPLANATORY MEMORANDUM

In  response  to  the  requirements  for  Palestinian  economic  and  social  development  following
the  Oslo  accords  and  the  first  donor  conference  in  Washington  in  October  1993,  the  EU
decided to establish a specific budget line in support of the peace agreement. To this end, the
Council, on 11 July 1994 adopted Regulation (EC) No 1734/94 on financial and technical co-
operation with the Occupied Territories (later renamed into co-operation with the West Bank
and the Gaza strip). This Regulation was amended twice in 1998 (No 2840 and 2824/98).

Article  1  of  the  Regulation  provides  for  implementation  of  the  financial  and  technical  co-
operation  to  be  carried  out  on  the  basis  of  five-year  programmes.  However,  the  constantly
changing  situation  on  the  ground  during  the  period  1998  to  2003,  and  in  particular  the
outbreak  of  the  second  Intifada  in  September  2000,  did  neither  allow  for  multi-annual
programming of financial assistance to the Palestinians nor for a comprehensive evaluation of
the implementation of the ongoing aid effort. Identification of priorities for our assistance had
to be done on an ad hoc basis and was implemented annually.

The Regulation of 1998 furthermore states that it should be brought into line with the MEDA
Regulation  following  the  latter’s  amendment  in  particular  as  regards  the  potential
beneficiaries of assistance.

Given that in addition the new financial Regulation (No 1605/2002) has been adopted as well
as  the  Decision  laying  down  the  procedures  for  the  exercise  of  implementing  powers
conferred on the Commission (No 468/1999), an  amendment  of  the Regulation  on  financial
and technical co-operation with the West Bank and the Gaza Strip has become necessary.

The amended Regulation will allow for  a  continuation of the Community’s  aid effort  to the
Palestinians to achieve sustainable economic, political and social development in line with the
new  rules  in  force.  This  is  essential  in  particular  against  the  background  of  the  recent
developments  on  the  ground.  A  new  political  landscape  is  emerging  following  the
appointment  of  Prime  Minister  Abu  Mazen  and  the  full  and  active  engagement  of  the
international  community.  This  has  given  rise  to  the  approval  by  all  parties  of  a  political
roadmap leading to the resolution of the Israeli-Palestinian conflict and the establishment of a
Palestinian state by 2005. However, the situation on the ground is still too fragile to enable the
Commission  to  come  forward  with  a  longer-term  approach  to  co-operation  with  the  West
Bank and the Gaza Strip. Still, a continuation of support is now needed to meet the exigencies
of  the  economic  and  humanitarian  situation,  to  further  advance  Palestinian  reform,  and  to
support  the  reawakened  peace  process.  With  regard  to  the  humanitarian  situation,  actions
envisaged will complement the humanitarian assistance provided by the Commission through
its Humanitarian Aid Office (ECHO).

It  is  therefore  proposed  to  amend  Council  Regulation  (EC)  No  1734/94  in  the  light  of  the
above. The proposed amendments are of a purely technical nature.

2

2003/0204 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND THE COUNCIL

amending Council Regulation (EC) No 1734/94 on financial and technical cooperation
with the Occupied Territories 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article
179 thereof,

Having regard to the proposal from the Commission1,

Acting in accordance with the procedure laid down in Article 251 of the Treaty,,

Whereas:

(1)

(2)

(3)

(4)

(5)

all  efforts  should  be  made  to  prevent  any  further  deterioration  of  the  Palestinian
economy by contributing to a sound management and fiscal balance of the Palestinian
Authority and to consolidate it by means of institutional reinforcement.

requirements  for  financial  aid  will  continue  to  be  generated  in  the  territories  of  the
West Bank and the Gaza Strip as a result of recent developments in the Middle East
Peace Process;

the Community should therefore pursue its aid effort pursuant to Regulation (EC) No
1734/94

Regulation (EC) No 1734/94 should be reviewed by the European Parliament and the
Council before the end of 2005 in order to take account of developments in the area, in
particular with regard to the implementation of the roadmap for peace (Elements of a
performance-based  road  map  to  a  permanent  two-state  solution  to  the  Israeli-
Palestinian conflict)

Council  Regulation  (EC,  Euratom)  No  2988/95  of  18  December  1995  on  the
protection  of  the  European  Communities’  financial  interests2  establishes  a  common
legal framework for all the fields of the Communities’ own resources and expenditure.
Council Regulation (Euratom EC) No 2185/96 of 11 November 1996 concerning on-
the-spot checks and inspections carried out by the Commission in order to protect the
European  Communities’  financial  interests  against  fraud  and  other  irregularities3
applies to all areas of the Communities’ activity without prejudice to the provisions of
Community rules specific to different policy areas;

1

2

3

OJ C […], […], p. […]
OJ L 312, 23.12.1995, p. 1
OJ L 292, 15.11.1996, p. 2

3

                                                
(6)

Regulation  (EC)  No  1734/94  on  financial  and  technical  co-operation  with  the
Occupied Territories should therefore be amended accordingly

HAVE ADOPTED THIS REGULATION:

Article 1

Regulation (EC) No 1734/94 is amended as follows:

1.

Article 1 is replaced by the following:

‘Article 1

1.

2.

The Community shall implement financial and technical co-operation with the
West  Bank  and  the  Gaza  Strip  with  the  aim  of  aiding  their  achievement  of
sustainable economic, political and social development. If circumstances allow,
implementation shall be based on pluri-annual programmes. 

The European Commission will provide a report reviewing this Regulation by
31 December 2005 at the latest, taking into account recent developments in the
area.

2.

In Article 2, :

the following paragraph is added after paragraph 3:

4.

Support  measures  may  also  include  eligible  beneficiaries  as  outlined  in  Art.
1(2)  of  Council  Regulation  (EC)  No  1488/96  of  23  July  on  financial  and
technical measures to accompany (MEDA) the reform of economic and social
structures in the framework of the Euro-Mediterranean partnership.4

the following paragraph 8 is added :

8.

Invitations to tender and contract shall be open on equal terms to all natural and
legal persons in the Member States and the Mediterranean partners. 

4

OJ L 189, 30.7.1996, p. 1-9

4

                                                
3.

In Article 4, the following paragraph 5 is added:

“Financing decisions and any financing agreements and contracts resulting therefrom
shall  provide,  inter-alia,  for  supervision  and  financial  control  by  the  Commission
(including  the  European  Anti-fraud  Office  (OLAF)),  including  on-the-spot  checks
and inspections in conformity with Council Regulation (Euratom, EC) No 2185/965
and audits by the Court of Auditors, where appropriate, to be carried out on the spot.
Measures shall be taken in accordance with the procedure set out in Article 5 in order
to  provide  for  adequate  protection  of  the  financial  interests  of  the  European
Community  in  conformity  with  Council  Regulation  (EC,  Euratom)  No  2988/956."
Where  necessary,  investigations  shall  be  conducted  by  the  European  Anti-Fraud
Office  (OLAF)  and  shall  be  governed  by  European  Parliament  and  Council
Regulation (EC) No 1073/1999.7

This  Regulation  shall  enter  into  force  on  the  third  day  following  that  of  its  publication  in
the Official Journal of the European Union.

Article 2

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 

For the Council
The President

5

6

7

OJ L 292, 15.11.1996, p. 2
OJ L 312, 23.12.1995, p.1
OJ L 136, 31.5.1999, p. 1.

5

                                                
LEGISLATIVE FINANCIAL STATEMENT

Policy area(s): Middle East

Activit(y/ies): Relations with the Middle East and the South Mediterranean

TITLE  OF  ACTION:  COMMUNITY  OPERATIONS  CONNECTED  WITH  THE  ISRAEL-PLO  PEACE

AGREEMENT

1.

BUDGET LINE(S) + HEADING(S)

190803 (ex- B7-42)

FIGURES 

2.1.

Total allocation for action (Part 190803): € million for commitment

47.75

2.2.

Period of application:

2004-2006

(start and expiry years)

2.3.

Overall multiannual estimate of expenditure:

(a)

Schedule  of  commitment  appropriations/payment  appropriations 
intervention) (see point 6.1.1)

(financial

€ million (to three decimal places)

Year
2004

2005

2006

[n+3]

[n+4]

Total

[n+5
and
subs.
Years
]

Commitments

47.75

47.75 47.75

Payments

(b)

Technical and administrative assistance and support expenditure(see point 6.1.2)

Commitments

Payments

6

Subtotal a+b

Commitments

Payments

(c)

Overall  financial  impact  of  human  resources  and  other  administrative  expenditure
(see points 7.2 and 7.3)

Commitments/
payments

TOTAL a+b+c

Commitments

Payments

2.4.

Compatibility with financial programming and financial perspective

X

Proposal is compatible with existing financial programming.

Proposal  will  entail  reprogramming  of  the  relevant  heading  in  the  financial
perspective.

Proposal  may  require  application  of  the  provisions  of  the  Interinstitutional
Agreement.

2.5.

Financial impact on revenue:8

X

Proposal  has  no  financial  implications  (involves  technical  aspects  regarding
implementation of a measure)

8

For further information, see separate explanatory note.

7

                                                
OR

Proposal has financial impact – the effect on revenue is as follows:

(NB All details and observations relating to the method of calculating the effect on
revenue should be shown in a separate annex.)

Budget line

Revenue

Prior to
action
[Year n-1]

(€ million to one decimal place)

Situation following action

[Year n]

[n+1]

[n+2]

[n+3]

[n+4]

[n+5]

a)  Revenue  in  absolute
terms

b) Change in revenue

(Please specify each budget line involved, adding the appropriate number of rows
to the table if there is an effect on more than one budget line.)

3.

BUDGET CHARACTERISTICS

Type of expenditure

New

EFTA
contribution

Contributions
form applicant
countries

Non-comp

Diff/

NO

NO

NO

Heading in
financial
perspective

No IV
EXTERNAL
ACTION

4.

LEGAL BASIS 

(Show main legal basis only.) 1734/94

5.

5.1.

DESCRIPTION AND GROUNDS

Need for Community intervention 9

5.1.1. Objectives pursued

(Describe  the  problem(s)/need(s)  (in  measurable  terms)  that  the  intervention  is  designed  to
solve/satisfy (the baseline situation against which later progress can be measured). Describe
the objectives in terms of expected outcomes (for example as a change in the above baseline
situation).)

The main objective of cooperation under this Regulation is to aid the West Bank and the Gaza
Strip  to  achieve  sustainable  economic,  political  and  social  development  in  view  of  the
creation of an independent, democratic, and viable Palestinian state. To do this, 

9

For further information, see separate explanatory note.

8

                                                
– 

– 

– 

– 

the  economic  and  humanitarian  situation  of  the  Palestinian  population  needs  to  be
improved;

social stability needs to be preserved by contributing to the provision of basic public
services;

institution-building of a future Palestinian state needs to be supported as well as the
reform process of the Palestinian Authority;

implementation of the EC-PLO (PA) interim association agreement as well as of the
Israel-PLO peace agreement needs to be facilitated.

5.1.2. Measures taken in connection with ex ante evaluation 

(This involves:

(a)

explaining how and when the ex ante evaluation was conducted (author, timing and
where  the  report(s)  is/are  available)  or  how  the  corresponding  information  was
gathered;10 

No  ex-ante  evaluation  has  taken  place  due  to  the  volatile  situation  on  the  ground  and  the
impossibility to program on a multi-annual basis.

(b)

describing briefly the findings and lessons learnt from the ex ante evaluation.)

5.1.3. Measures taken following ex post evaluation

(Where a programme is being renewed the lessons to be learned from an interim or ex post
evaluation should also be described briefly.)

The present proposal is a renewal of an existing programme. One of the lessons learned from
the current programme is that the volatile situation in the West Bank and the Gaza Strip does
not  allow  for  multi-annual  programming  as  foreseen  in  the  Regulation  to  be  amended.
Instead, programming of financial assistance for technical and economic co-operation should
also be possible on an annual basis. 

5.2.

Action envisaged and budget intervention arrangements

(This point should describe the logic behind the proposal. It should specify the main actions
to  achieve  the  general  objective.  Each  action  should  have  one  or  more  specific  objectives.
These should indicate the progress expected over the proposed period. They should also look
beyond immediate outputs but be sufficiently precise to allow concrete results to be identified.
Specify for each main action:

10

For minimum information requirements relating to new initiatives, see SEC(2000) 1051.

9

                                                
– 

– 

– 

– 

– 

the target population(s) (specify number of beneficiaries if possible); 

the specific objectives set for the programming period (in measurable terms);

the concrete measures to be taken to implement the action ;

the immediate outputs of each action; and

the  contribution  of  these  outputs  to  the  expected  outcomes  in  terms  of  satisfying
needs or solving problems 

Information should also be given on the budget intervention arrangements (rate and form of
the required financial assistance).)

Main actions to achieve the general objective will be structured around measures to support
social and economic development, and good governance. 

– 

Improvement  of  social  services,  especially  in  the  areas  of  health,  family  planning,
water supplies, sanitation and housing.

Target  population  is  the  Palestinian  population  in  the  West  Bank  and  the  Gaza  Strip,  the
specific objective is the maintenance of  basic  public services in  the areas mentioned  above.
Concrete measures to be taken to implement the actions will be i.a. targeted sectoral support
to  the  relevant  ministries,  project-based  implementation  for  infrastructure  projects,  and
technical assistance for capacity-building in the mentioned areas.

– 

Creation of an economic environment  favourable  to  economic  growth,  while  at  the
same time seeking to improve the well-being of the population. 

Target population is the Palestinian Authority, and in particular the Ministry of Finance, the
specific objective is to improve public finances and their administration.  Concrete measures
to be taken to implement the actions will be targeted sectoral support or the establishment of a
structural adjustment facility.

– 

Establishment  of  the  infrastructure  necessary  for  trade,  including  transport,
communications  and  energy,  together  with  the  improvement  of  the  regulatory
framework and small-scale infrastructure projects for trade enhancement

Target population are the relevant Palestinian ministries as well as the business community in
the West Bank and the Gaza Strip, the specific objective is to create favourable conditions for
trade with enterprises in the West Bank and the Gaza Strip. Concrete measures to be taken to
implement the actions will be technical assistance to the PA, training, support to infrastructure
projects.

– 

Improvement of good governance by assisting in the improvement of the capacity of
the public administration to develop policies and manage their implementation, and
by  supporting  key  institutions  and  key  protagonists  in  civil  society  such  as  local
authorities,  mutual-aid  associations,  trade  unions,  the  media  and  organisation
supporting  business  as  well  as  by  strengthening  democracy  and  respect  for  human
rights  in  particular  through  non-governmental  organisations  in  the  EC  and  the
Mediterranean partners.

10

Target population is the Palestinian Authority as well as the  ‘informal sector’ (cf.  examples
above),  the  specific  objective  is  to  support  the  reform  process  and  the  development  of  an
open,  transparent,  and  accountable  administration.  Concrete  measures  to  be  taken  to
implement the actions will be technical assistance projects, capacity-building, training, as well
as small-scale projects for (office) equipment.

5.3.

Methods of implementation

(Specify the methods to be used to implement the planned actions: direct management by the
Commission using either regular or outside staff or by externalisation. In the latter case, give
details  of  the  arrangements  envisaged  for  this  externalisation  (TAO,  Agencies,  Offices,
decentralised  executive  units,  management  shared  with  Member  States  -  national,  regional
and local authorities.)

Indicate  the  effect  of  the  externalisation  model  chosen  on  the  financial  intervention,
management and support resources and on human resources (seconded officials, etc.).)

As  in  the  current  programme,  the  actions  will  be  implemented  by  the  EC  Delegation  in
Jerusalem which will be fully deconcentrated in 2004. Implementation will be mainly done on
a  centralised  basis  by  the  Commission,  but  also  in  co-operation  with  international
organisations (e.g. UNRWA).

6.

FINANCIAL IMPACT

6.1.

Total financial impact on Part B - (over the entire programming period)

(The method of calculating the total amounts set out in the table below must be explained by
the breakdown in Table 6.2. )

6.1.1.

Financial intervention

Commitments (in € million to three decimal places)

Breakdown

2004

2005

2006

[n+3]

[n+4]

Total

[n+5
and
subs.
Years]

Action 1 

Action 2 

Action 3 

Action 4 

TOTAL 47.75

47.75

47.75

143.25

11

6.1.2.

Technical  and  administrative  assistance,  support  expenditure  and  IT  expenditure
(commitment appropriations)

[Year
n]

[n+1]

[n+2]

[n+3]

[n+4]

Total

[n+5
and
subs.
years]

1) 
administrative assistance

Technical 

and

Technical 

a) 
offices

assistance

b)  Other 
administrative assistance:

technical 

and

- intra muros:

- extra muros:

of  which  for  construction
and 
of
maintenance 
computerised  management
systems

Subtotal 1

2) Support expenditure

a) Studies

b) Meetings of experts

c) Information and
publications

Subtotal 2

TOTAL

12

6.2.

Calculation  of  costs  by  measure  envisaged  in  Part  B  (over  the  entire
programming period)11

(Where  there  is  more  than  one  action,  give  sufficient  detail  of  the  specific  measures  to  be
taken for each one to allow the volume and costs of the outputs to be estimated.)

Breakdown 

Commitments (in € million to three decimal places)

Type
of outputs
(projects, files )

Number of
outputs

Average unit
cost

(total for years
1…n) 

Total cost

(total for years
1…n)

1

2

3

4=(2X3)

Action 1

- Measure 1

- Measure 2 

Action 2

- Measure 1

- Measure 2

- Measure 3

etc.

TOTAL COST

If necessary explain the method of calculation

7.

IMPACT ON STAFF AND ADMINISTRATIVE EXPENDITURE 

7.1.

Impact on human resources

Types of post

Staff to be assigned to management of the
action using existing and/or additional
resources

Number of
permanent posts

Number of
temporary posts

Total

1 existing

Officials 
temporary staff

or

5 existing

4 existing

2 existing

A

B

C

Other human resources

Total

7.2.

Overall financial impact of human resources

Description of tasks deriving from
the action

Programming, Identification,
implementation and monitoring of
measures supported

If necessary, a fuller description
of the tasks may be annexed.

Type of human resources

Amount (€)

Method of calculation * 

11

For further information, see separate explanatory note.

13

                                                
Officials

Temporary staff

Other human resources

(specify budget line)

Total

The amounts are total expenditure for twelve months.

7.3.

Other administrative expenditure deriving from the action

Amount €

Method of calculation

Budget line

(number and heading)

Overall allocation (Title A7)

A0701 – Missions

A07030 – Meetings
A07031 – Compulsory committees 1
A07032 – Non-compulsory committees 1

A07040 – Conferences

A0705 – Studies and consultations

Other expenditure (specify)

Information systems (A-5001/A-4300)

Other expenditure - Part A (specify)

Total

The amounts are total expenditure for twelve months.

1 Specify the type of committee and the group to which it belongs.

I.

II.

III.

Annual total (7.2 + 7.3)

Duration of action

Total cost of action (I x II)

€

years

€

(In the estimate of human and administrative resources required for the action, DGs/Services
must take into account the decisions taken by the Commission  in its orientation/APS debate
and when adopting the preliminary draft budget (PDB). This means that DGs must show that
human  resources  can  be  covered  by  the  indicative  pre-allocation  made  when  the  PDB  was
adopted. 

14

Exceptional cases (i.e. those where the action concerned could not be foreseen when the PDB
was  being  prepared)  will  have  to  be  referred  to  the  Commission  for  a  decision  on  whether
and how (by means of an amendment of the indicative pre-allocation, an ad hoc redeployment
exercise,  a  supplementary/amending  budget  or  a  letter  of  amendment  to  the  draft  budget)
implementation  of  the  proposed  action  can  be  accommodated.)  The  needs  for  human  and
administrative resources shall be covered within the allocation granted to the managing DG in
the framework of the annual allocation procedure.

8.

FOLLOW-UP AND EVALUATION

8.1.

Follow-up arrangements

(Adequate  follow-up  information  must  be  collected,  from  the  start  of  each  action,  on  the
inputs,  outputs  and  results  of  the  intervention.  In  practice  this  means  (i)  identifying  the
indicators for inputs, outputs and results and (ii) putting in place methods for the collection of
data).

Follow-up  of  the  programme  will  be  ensured  on  the  one  hand  by  regular  reports  of  the
Independent Task Force on Palestinian reform, on the other hand by the continuous work of
the local reform support groups and the monitoring mechanism of the roadmap. According to
the provisions of this Regulation (art. 6.1), reporting on the implementation of the programme
will be done by the Commission by means of annual reports to the European Parliament and
Council.

8.2.

Arrangements and schedule for the planned evaluation

(Describe the planned schedule and arrangements for interim and ex post evaluations to be
carried out in order to assess whether the intervention has achieved the objectives set. In the
case  of  multiannual  programmes,  at  least  one  thorough  evaluation  in  the  life  cycle  of  the
programme is needed. For other activities ex post or mid-term evaluations should be carried
out at intervals not exceeding six years.)

An  evaluation  will  be  carried  out  by  EuropeAid  in  time  for  the  Council  and  European
Parliament to review this Regulation as provided for in art. 1(2).

15

9.

ANTI-FRAUD MEASURES

(Article 28(3) of the Financial Regulation: "In order to prevent risk of fraud or irregularity,
the  Commission  shall  record  in  the  financial  statement  any  information  regarding  existing
and planned fraud prevention and protection measures.")

In  order  to  protect  the  European  Community's  financial  interests  against  fraud  and  other
irregularities,  the  Commission  may  also  carry  out  on-the-spot  checks  and  inspections  under
this programme in accordance with Council Regulation (Euratom, EC) No 2185/9612. Where
necessary, investigations shall be conducted by the European Anti-Fraud Office (OLAF) and
shall be governed by European Parliament and Council Regulation (EC) No 1073/1999.13

The  beneficiary  of  an  operating  grant  shall  keep  available  for  the  Commission  all  the
supporting  documents,  including  the  audited  financial  statement,  regarding  expenditure
incurred  during  the  grant  year,  for  a  period  of  five  years  following  the  last  payment.  The
beneficiary  of  a  grant  shall  ensure  that,  where  applicable,  supporting  documents  in  the
possession of partners or members are made available to the Commission.

The Commission will carry out regular document checks and on-the-spot checks.

12 
13

OJ L 292, 15.11.1996, p. 2
OJ L 136, 31.5.1999, p. 1.

16